Monday, 22 November 2010

While, a year or two ago, the dust clouds of the fallen giant investment banks were still settling, at many a place the discussion opened whether it was these CEOs' business school education that caused him (invariably him…) to act in such a selfish, destructive and unethical way.

For example, Forbes debated the issue heavily under the title “are B-schools to blame?” while at the Harvard Business Review a discussion raged under the highly similar header of “are business schools to blame?” (as if they plagiarised each other… which I thought would add some juice to an ethics discussion…). Although there was the occasional stern defendant of the system, most treated the question as a rhetorical one (“yes, of course!”) and vehemently declared denial itself to be almost as unethical as the destructive actions themselves.

But what’s the evidence; was there any presented? Do we actually know whether earning an MBA makes one behave more unethical and less socially responsive? No we don’t. I was asked by a BBC World presenter, after giving a speech at the Rotterdam School of Management, whether it wasn’t true that most of the corporate villains had MBAs? I had to admit I didn’t know but, even if it were true – that most of the disgraced (and sometimes jailed) corporate villains were lauded with an MBA – what does it prove?

Suppose that 60 percent of the villains had MBAs; perhaps 70 percent of all major corporations in the world are headed by MBAs; this would actually imply that of the villains relatively fewer have an MBA than of all (non-villain) corporate big shots! It is irrelevant whether most villains had an MBA; the relevant question is whether getting the MBA made them more likely to be vile. And frankly, that we did not know.

And I say “did” because now we do – at least sort of. Professors Daniel Slater from Union University and Heather Dixon-Fowler from Appalachian State University decided to, rather than contribute yet another 'informed opinion' and 'point of view', actually test the conjecture. And, in retrospect, that wasn’t so hard to do…

Because they simply looked up the “corporate environmental performance” score for 416 Standard & Poors 500 firms as put together by the company KLD Research and Analytics Inc. Nowadays there are quite a few corporate social responsibility rating agencies and systems around but KLD’s is generally regarded a very good one, because they are fully independent and really track a variety of indicators, gathering the information from multiple sources, including extensive inspection of public records, surveys, and on-site facility inspections. Dan and Heather also looked up whether those companies had CEOs with or without an MBA, and used that to compute whether firms with MBAs at the helm performed any worse in terms of corporate environmental performance than firms with a CEO who did not go to B-school.

And the answer was a resounding no. They checked whether this effect could be due to all sorts of confounding variables (like the CEO's functional background, age, education level, firm size, prior financial performance, type of industry, etc.) but, nope, really: the companies headed by MBAs were no more likely to be vile.

As a matter of fact, they were less likely to be vile! Companies with CEOs with an MBA generally did better in terms of corporate environmental performance; it were the non-business-educated chief executives that engaged in the bad stuff. I reckon that’s quite a shocker to the average righteous blogger in leftish spheres: business school actually makes one more socially aware and responsive!

And, on a final note, it didn’t make any difference whether you were from Ivey League Harvard or had your MBA from the University of New South Nebraska State; programme rank had no influence on these blissful results.

And now I am going to take a walk down our corridor to the office of our Ethics Professor and apologise for calling her course “pointless”… See you later.

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About this Blog

Freek Vermeulen is an Associate Professor of Strategy and Entrepreneurship at the London Business School. FREEKY BUSINESS probes what really goes on in the world of business, once you get beneath the airbrushed façade. It examines the people that run companies – CEOs, managers, directors – and dissects the temptations, the influences and the sometimes ill-advised liaisons and strategies of corporate life.